Friday, May 18, 2012

Social costs in efficient markets

Paying for the right to jump the line has heavy social and cultural costs, according to Michael Sandel's new book, What Money Can't Buy, which he excerpted in the Guardian last week. He says:

To an economist, long queues for goods and services are wasteful and inefficient, a sign that the price system has failed to align supply and demand. Letting people pay for faster service at airports and amusement parks improves economic efficiency by letting people put a price on their time.

But there is a social cost to this efficiency:

In airports, amusement parks and hospital waiting rooms, the ethic of the queue – "first come, first served" – is being displaced by the ethic of the market – "you get what you pay for".

And this shift reflects something bigger: the growing reach of money and markets into new spheres of life. ...

Why worry that we are moving towards a society in which everything is up for sale? For two reasons: one is about inequality; the other is about corruption. In a society where everything is for sale, life is harder for those of modest means. The more money can buy, the more affluence (or the lack of it) matters. But also, putting a price on the good things in life can corrupt them. Paying children to read books might get them to read more, but it might also teach them to regard reading as a chore rather than a source of intrinsic satisfaction. Sometimes, market values crowd out nonmarket values worth caring about.

Those values include civic responsibility, a sense of being part of a polity, cultural cohesion, etc. I'm sure we have all experienced the psychic value of being the one who gets to jump the line at least once in a while but perhaps more often the psychic cost of watching others do so.

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